The biggest problem with HAMP, the Obama Administration’s mortgage modification program, is the leeway it gives to the banks to set the terms of the negotiation. Even when they violate the guidelines of the program, they face little recourse. We can see this in the story of David Justian of Muskegon, MI. He purchased his home for $245,000 that has recently been appraised for $154,000 (He currently owes about $220,000). Justian has been chronicling some of his HAMP experience at a personal website, with all the attendant twists and turns, but the turning point of what was a pretty pleasant process came recently.

Justian was immediately approved for a trial modification from Chase, which was supposed to last three months. And then:

2.5 months into the trial period I was informed by Chase that they transferred my file that they serviced (my loan is owned by Fannie Mae) to IBM Lender Business Professional Services and that my 3rd monthly trial period pmt had to be paid to them, which I did. I have since been contacted by IBM LBPS via a note taped to my door that I was in default and that I had to re-apply for HAMP with them. Everything I had going with Chase, they said, was of no consequence. I called the HAMP Hotline and was told that any file that was sold or transferred had to start all over again. That’s the rule. When I noted that my file could be transferred every 2.5 mos. and it wasn’t fair, they said, “well, that’s business, don’t expect them to be fair.”

Why, if only there was a government agency who could try to force some fairness on the process! This endless loop of selling the loan to extend the trial process is nothing new; Justian has heard from others who had their Chase loans sold to IBM LBPS and had to restart their modifications. This is despite assurances at the time of the sale that any transfers would not change mortgage terms and conditions. “My position is that a mortgage modification” signed by both the borrower and the loan servicing company modifies the mortgage terms and conditions which cannot be changed simply
because of a transfer,” said Justian, though IBM obviously begs to differ.

Where it stands now is with IBM re-evaluating the modification, which could drop the payment as much as $900 a month. HAMP Hotline told Justian that the bank must “determine if the file can be be profitable with the mortgage modification.” They can deny the modification if it makes no financial sense for them.

This is ultimately the Achilles heel of the program. The mortgage servicers make decisions in their own interest, despite the program being sold as in the interest of the homeowner. This story from Hampton Roads, Virginia is indicative of that:

Michele McBeth was not behind on her house payments and never had been. But money was tight for the Norfolk elementary school teacher in 2009. She hadn’t seen a raise in years, and her son would soon be starting college.

McBeth was looking for any way to relieve some of the strain on her budget, so she contacted her mortgage company to see whether it could lower her payments.

The company offered help through the U.S. Treasury Department’s Making Home Affordable program, and McBeth signed on to a trial loan modification.

Now, almost a year later, McBeth is facing foreclosure.

The story is honestly disgusting, and reminiscent of many I’ve told – borrowers denied for a permanent mod, with the lender trying to force them into an in-house mod with less favorable terms, or threatening immediate foreclosure. The mortgage companies achieve this by ignoring the guidelines, lying to their customers (like telling them to miss a payment on purpose, or accepting them into the program when the savings are modest) and basically running over people just trying to save their homes. As McBeth says in the article (which I urge you to read), “Initially, I thought they were looking to help me out. Eventually, it began to feel like they wanted to take my house.”

People are just being chewed up by the banks with this program. It’s unconscionable.

I agree. I have also walked away from banking completely. I cash my SS check at Walmart (without spending it there). I do cash my paycheck at the bank where it is drawn. But I will never use a big bank again. I will stay with local credit unions if I ever have any money of consequence.

Wasn’t one of the success metrics that Treasury touted was that HAMP was allowing some people to stay in their homes longer?

As I’ve come to understand it, the program is successful because enough people stayed in their homes just long enough to prevent too large a number of defaults all at once. This was done mostly to help banks weather the crisis, not homeowners.

As I’ve come to understand it, the program is successful because enough people stayed in their homes just long enough to prevent too large a number of defaults all at once. This was done mostly to help banks weather the crisis, not homeowners.

I don’t own property and am pretty ignorant about real estate in general. But this seems to be the case from what I know in terms of acquaintances trying their darndest to work within the HAMP program to renegotiate their loans, etc. I keep hearing the same stories about people being jerked around by the banks, the banks keep “losing” documents, etc, and the final outcome is usually that the homeowner is told there’s “nothing” that the bank can do.

Often it seems that the homeowners are told that they’re not “eligible” for HAMP after being jerked around for a number of months. It’s likely that this has served to spread out the new foreclosures over time, rather than happening all at once.

I expect nothing to be done to improve this situation. The banksters own Team Obama; BHO is at their beck & call. We are not BHO’s constituents as has been obvious from the beginning.

For those of you are fans of Rachel Maddow & Olberman on MSNBC…how exactly do you explain their not even wanting to cover this……hope this convinces you that they are not interested in ordinary Americans circumstances…..they represent the WH….and their mission is to tell us GOP are crazy….this we already know.Maddow even went as far as to tells us that Obama was comparable to LBJ….

Just like how the folks over at FauxNews shills for the GOP..Maddow & Olberman are shills for the DNC….Do you really think the Corporate TV wants you to know what’s going on…

Why do you want to hurt the people who basically agree with you? Chill, baby, and focus your frustration at the enemy. Yeah, it’s hot here too. Dude! You are not the only one hurting. Do you know that? Do you know that lifting up is better than a circle shoot? I’m lift up a thought for you, now.

Nah, BMMcGarth is spot on. DNC and RNC=the enemy. Just different sides of the same elite. You know, the elite that wants all of us to eat out of fucking garbage bins. Fuck that. Time for a new paradigm, man.

The hippies were right. The Man is the problem. Oilbummer and the Rethuglicans ARE the Man!

In that case, the person wasn’t in HAMP and they had made regular payments to Chase for 5 years.

I have personal experience with IBM on another matter unrelated to lending or mortgages. What I have found is that it’s a company that likes to write its own rules, and too many people spend too much time just C(Their)OA. So it may actually be possible that HAMP does not allow this kind of thing, the telephone service person at Fannie was simply not well informed, and the IBM person was just following what someone else within IBM decided was the federal rule.

I’m with you BMc. I quit watching KO and RM quite a while back when it was obvious they were giving Obama a free pass. Where was the the outrage on the continuation of so many Bush policies? Now that Obama has institutionalized them, we’re stuck, barring a complete miracle.

Sure, it’s fun bashing Palin and the fringe, but that was shooting fish in a barrel *and* doing nothing to push or even nudge Obama in the right direction.

If you think Maddow & Olberman are fighting your cause….get a freakin clue. they utter a few key phrases that you can identify with & you go crazy…..like I said in the previous post why aren’t they covering the HAMP program if they care so much about average Americans…..

I don’t support people who do the dirty work of corporations under the guise that they are for progressive causes….

Wake up…can’t you see the script that you have bought into….Dem Corporatist against GOP corporatist…..where the heck do you fit in there ?….unless you have a big bank account….Maybe you do… then I see why you would want me to hush,hush about the class warfare that’s being handed out to us by the rich……BTW,the rich folks are winning…..each year we have millions upon millions filling the category of poor while the rich get richer.

Well,I quit watching ‘em too.But every now & the I tune in and can only watch…..3-4 minutes of their programming…it’s all GOP are bad all the time like we didn’t know….Their is nothing on their shows about the suffering of ordinary Americans..nothing,it’s like these problems are non -existent.

Fannie Mae required the transfer of the servicing to IBM LBPS. All FNMA servicers had to comply on a portion of their loans. My company competed for the contract, but did not win. The stories as reported are common, but I have also seen loans that were APPROVED for modification, with documents sent and received by the borrower. However, if those were not received back signed and notarized prior to the transfer, then the terms of the loan were not changed. Is LBPS going to honor those modifications? Question has been asked, but I do not yet know an answer.

The stories as reported are common, but I have also seen loans that were APPROVED for modification, with documents sent and received by the borrower. However, if those were not received back signed and notarized prior to the transfer, then the terms of the loan were not changed. Is LBPS going to honor those modifications? Question has been asked, but I do not yet know an answer.

I am not in the business, but I just want to check something.

Normally, if a party (a person, a company) puts out an offer, the offer remains valid unless some deadline was also attached. You have to give the other side notice that you are retracting the offer. (Otherwise, how would anyone be able to trust an outstanding offer?) So it sounds like nonsense that Fannie could change servicers, and say that the original offer was no longer valid because the loan servicer is different. Fannie still owns the mortgage.

This is simple offer and acceptance, isn’t it?

In cases like the one in David Dayen’s post where the new terms not only have been accepted, but the parties have conducted further dealings under the new terms, it just sounds like IBM LBPS didn’t get all the information they should have, and instead of acknowledging that they didn’t have all the information, sought to place the blame somewhere else. Again, I say, this is typical. They probably didn’t have enough staff working on the transfer issues.

It’s probably why you lost in the bidding. You priced in what it would actually cost to do the job right. Others may simply have put out a low bid, and then scramble to provide the service.